Court of Appeal Reverses Class Certification and Clarifies Wage and Hour Requirements in Welcome Victory for California Employers

On July 22, 2008, the California Fourth Appellate District Court of Appeal (Division One) granted the employer’s petition for a writ of mandate in Brinker Rest. Corp. v. Superior Court, reversing class certification and clarifying state wage and hour requirements pursuant to Labor Code Sections 226.7 and 512, as well as the Industrial Welfare Commission’s (“IWC’s”) Wage Order No. 5.

The San Diego County Superior Court had certified a class action filed on behalf of approximately 59,000 past and present employees of Brinker Restaurant Corporation, which operates 137 restaurants in California, including Chili’s Grill & Bar, Romano’s Macaroni Grill and Maggiano’s Little Italy. Plaintiffs alleged that the restaurant chain had failed to provide certain rest and meal breaks—or compensation in lieu of such breaks—and required them to perform “work off the clock” during meal breaks. The trial court certified the class action after finding that common issues predominated and that questions regarding meal and rest breaks were “pervasive.” The Court of Appeal disagreed; it reversed and directed the trial court to deny certification.

This 53-page decision is a long-awaited and welcome victory for California employers in several respects. First, the Court held that plaintiffs’ claims were not amenable to class certification because they require “hopelessly individualized” inquiries, which could easily result in thousands of “mini-trials.” Second, it did so based on its holding that employers are only required to “make available” to employees rest and meal breaks—not to ensure that employees actually take them. Finally, the Court held that Brinker was not liable for employees working off the clock unless it “knew or should have known” that employees were doing so.

The Court’s most critical holding is the second one, which could fundamentally change the landscape of wage and hour class actions in California. The court rejected plaintiffs’ argument that an employer is legally obligated to ensure that each of its employees takes the appropriate meal and rest breaks, at the appropriate times. “If this were the case, employers would be forced to police their employees and force them to take [] breaks. With thousands of employees working multiple shifts, this would be an impossible task. If they were unable to do so, employers would have to pay an extra hour of pay any time an employee voluntarily chose not to take a meal [or rest] period, or to take a shortened one.” In reaching this conclusion, the Court favorably cited comparable federal decisions, including White v. Starbucks Corp., 497 F. Supp. 2d 1080 (N.D. Cal. 2007), and Brown v. Federal Express Corp., __ F.R.D. __ (C.D. Cal. 2008), and distinguished several state court decisions.

The Court also concluded that the trial court erred by “fail[ing] to properly consider the elements of plaintiffs' claims in determining if they were susceptible to class treatment.” Indeed, the Court rejected the argument that reports generated by a centralized computer system, “expert statistical and survey evidence” regarding the employer’s past practice, and detailed declarations of 33 hourly employees could demonstrate class-wide state wage and hour violations. “The question of whether employees were forced to forgo rest [and meal] breaks or voluntarily chose not to take them is a highly individualized inquiry that would result in thousands of mini-trials to determine as to each employee if a particular manager prohibited a full, timely break or if the employee waived it or voluntarily cut it short.” Similarly, plaintiffs’ off-the-clock claim was not amenable to class treatment, as it required individualized inquiry into whether Brinker forced employees to work off the clock, changed time records, or knew or should have known that employees were working off the clock.

On a technical note, the Court’s decision clarifies several ill-defined provisions of California wage and hour law. For example, the Court rejected plaintiffs’ interpretation of Wage Order No. 5’s requirement that an employer provide 10-minute rest breaks every “four (4) hours or major fraction thereof.” The court rejected plaintiffs’ argument that a “major fraction thereof” means more than two hours. Instead, the Court concluded that the phrase must mean 3.5 hours since under the Wage Order no one who works less than 3.5 hours is entitled to any breaks. The Court also disagreed with plaintiffs’ reading of Labor Code Sections 226.7 and 512, as well as Wage Order No. 5, with respect to Brinker’s practice of “early lunching” (i.e., requiring employees to take their meal periods soon after they arrive for their shifts and then to work in excess of five hours without an additional meal period). It clarified that an employer is not required to provide a meal break every five consecutive hours worked. Thus, an hourly employee is not entitled to a second meal break five hours after he or she returns from the first meal break. Rather, the employer must consider the total number of hours worked per day.

Not surprisingly, plaintiffs have already announced that they intend to appeal the decision in Brinker to the California Supreme Court. For the time being, employers are likely to share Governor Arnold Schwarzenegger’s enthusiasm, as reflected in a press release issued by his office—stating in part, “The confusing and conflicting interpretations of the meal and rest period requirements have harmed both employees and employers. Today’s decision promotes the public interest by providing employers, employees, the courts and the labor commissioner the clarity and precedent needed to apply meal and rest period requirements consistently.” 


This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Scott Dunham, an O'Melveny partner who is licensed to practice law in California, and Shannon Gibson, an O'Melveny associate who is licensed to practice law in New Jersey, California, and the District of Columbia, both contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.



 

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